Sussman v. Bank Of Israel

56 F.3d 450 (2d Cir.), cert denied, 516 U.S. 916 (1995)

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Nature of the Case

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Facts

In 1985, a bank in Israel collapsed. D made payments to those depositors and in 1989 commenced a civil action in Israel in the name of the State of Israel naming as defendants P, Guilden, and several other officers and directors of failed bank. D alleged that the directors had been negligent and had breached their fiduciary duties by failing to monitor adequately the management of the bank and to ensure that the bank operated in compliance with Israeli banking regulations. P asserted third-party claims against D alleging negligence in failing to carry out their supervisory duties and that D had deliberately misrepresented the bank's financial condition and concealed from non-Israeli directors certain financial transactions stemming from a 1983 banking scandal in Israel. Lewin was retained and investigated and then filed a complaint in New York against D, and others. The complaint parroted the allegations that Ps were duped and lied to about backdoor deals etc. Ps sought damages totaling $17 million for the lost value of their investments in the failed bank. Lewin sent a warning letter to Ds and even draft copies of the complaint. Ps were told that D would not settle. Ps filed the complaint. D immediately moved to dismiss on the grounds of forum non conveniens. The district court dismissed.

It required Ds to waive any statute-of-limitations defense under Israeli law that might have become available after the commencement of the New York action. The court required the Israeli government to provide P with 'written assurances' that he would not be detained in Israel should he travel there for the purpose of defending the Israeli action or of asserting claims covered by the New York complaint. D then moved for Rule 11 sanctions. The court imposed $50,000 in sanctions against Lewin under its inherent power to deal with abusive litigation. The court used Lewin’s warning letter as its basis. The court acknowledged that prelitigation letters do not fall within the scope of the Rule, but that Lewin's strategy constituted an 'abuse of the litigation process,' and that the letters provided 'powerful evidence of the improper purpose for which the New York complaint was filed.' Everybody appealed.